Gene Munster: Apple iPhone 14 Pro pain in December will be March’s gain

On November 6th, Apple announced that China’s quixotic “Zero COVID” lockdowns were impacting its iPhone 14 Pro and iPhone 14 Pro Max supplies. The magnitude of the impact was left unsaid. As the quarter progresses, Loup’s Gene Munster and Co. have been tracking iPhone lead times and commentary from suppliers.
Apple’s iPhone 14 Pro and flagship iPhone 14 Pro Max
Gene Munster and Rebecca Mulberg for Loup:

In the end, we believe that the best way to decode iPhone demand is to set aside iPhone assembly timing and, instead, combine the results from the December and March quarters. Using this formula, we expect the iPhone will exceed Street estimates for the next two quarters combined.
*It’s worth noting that our view is based on a stable consumer over the next four months.
Our latest tracking of iPhone 14 Pro/Pro Max lead times in eight countries shows a modest improvement in lead times, from an average of 5.5 weeks in November to 4.3 weeks on December 9th. As a point of reference: Last year, on December 12th, we measured a 0.9 week average lead time for the iPhone 13 Pro model. That means that lead times are up 3X y/y on what we believe is a combination of tight supply driven by China’s Covid restrictions along with favorable demand for the Pro models.
We believe that the iPhone Pro/Pro Max are Apple’s two largest products and estimate they will account for around 22% of sales in December. While encouraging to see lead times contract over the past two weeks, they remain higher than we would normally see at this point in the quarter. That means we will likely see substantially more units slip from the December quarter into the March quarter. In theory, three weeks of delayed Pro/Pro Max shipments would create a 4.5% headwind to December overall revenue.
The good news is there is a case of déjà vu in play: December’s pain will be March’s gain as Apple is likely to recapture these sales at a later date.

MacDailyNews Take: Yup.
These iPhone 14 Pro sales are merely deferred, not lost. Some may shift down to iPhone 14 and iPhone 14 Plus, but most buyers will simply wait for supply to catch up amidst strong demand. – MacDailyNews, November 16, 2022
Even before the iPhone 14 range was unveiled, we predicted heavy demand for the Pro models over prior years because Apple seemed determined to better differentiate the Pro over the base models.
Apple should have been doing this prior, but it’s good to see some additional differentiation between entry-level and “Pro” iPhone which will, of course, tilt more buyers to iPhone Pro models, increasing Apple’s iPhone ASP. The expected removal of the inelegant kludge (notch) in favor of a more refined pill and hole punch design exclusively in the iPhone 14 Pro and iPhone 14 Pro Max will also help differentiate the Pro models from the non-Pro iPhones later this year, moving the mix toward higher-end iPhones. – MacDailyNews, July 6, 2022
Apple iPhone mix is easily going to be the strongest ever. Do not be surprised with the reports that Apple has “cut iPhone 14 orders,” meaning iPhone 14 and iPhone 14 Plus. The company will likely be increasing iPhone 14 Pro and iPhone 14 Pro Max orders to reflect the strong mix which bodes very well, of course for Apple’s iPhone average selling price (ASP). – MacDailyNews, September 14, 2022
China’s CCP threw a monkey wrench into the spokes, disrupting iPhone 14 Pro supply just in time for Christmas. However, also as we predicted, the “Zero COVID” nonsense has gone by the wayside in China now which bodes well for Apple’s fiscal 2023 second quarter ending in March.
There’s no such thing as zero-COVID, but this year is the Chinese Communist Party’s 20th party congress, so the farce will continue until the politics no longer dictate tilting at windmills. Then COVID will be allowed to wash through China, as it already has around much of the world. – MacDailyNews, May 9, 2022
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